Finally, the automotive industry is on the rebound. Unit sales, exports, and even motor vehicle employment have made significant gains since their landmark free-fall that began in late 2007. The U.S. Department of Commerce, Economics and Statistics Administration reported that “the U.S. motor vehicle industry has made a remarkable comeback after experiencing an incredibly deep decline during the most recent recession.”

The depth of the fall was remarkable. Motor vehicle unit sales, which had been hovering around the 16 million mark from 2006 – 2008, plunged well below 10 million within the span of a year, hitting bottom in the first quarter of 2009. Since then, it has taken three years to climb back to 15 million units per year, a sales level that hasn’t been seen since the second quarter of 2008.  

A Rocky Road
The rocky road to recovery, however, has been filled with pot holes leaving lasting marks on the automotive industry while redefining business relationships, dealer networks, and customer expectations.

Dealer Consolidations – As the number of new car and truck sales dramatically fell throughout the recession, auto dealerships felt the pressure.  Dealers, fighting for more sales from fewer customers experienced savage competition and high promotional discounting, forcing many struggling dealerships to shutter their doors. According to a Wall Street Journal report, auto makers also cut hundreds of dealers during bankruptcy reorganization with Chrysler closing more than 780 and GM closing 1,650 dealerships.

OEM Misalignment – While production was bottoming out, consumer preference of car types was changing. Electric cars, hybrids, and compact vehicles with better gas mileage gained in popularity as drivers struggled to battle rising fuel prices.  OEMs eager to capitalize on the frugality trend were out-positioned by imports that were already well established in the compact, sub-compact and mileage friendly models.

Light at the End of the Tunnel
Despite substantial changes, the automotive industry is seeing the light at the end of the tunnel. According to Edmonds, an online resource for automotive information, in their Auto Industry Trends for 2013 report, “The U.S. auto industry has shown sustained momentum the past few years, making solid progress toward recovery of pre-recession sales levels. Momentum will slow in 2013 but growth will continue.”

Stronger Dealerships – The same Wall Street Journal article confirms the trend toward stronger dealerships saying “wrenching consolidations behind them, surviving new car retailers enjoy higher sales and profits.”  Automotive dealerships and dealer networks are stronger, more profitable with less competition.  The same article reports that “the nation's 17,659 surviving outlets posted dramatic profit gains last year, according to a survey by consultant Urban Science. Its survey shows dealer earnings individually climbed by between 38% and 129% over 2009.”

New Technology and New Models – Automakers, responding to customer preferences, have introduced more new models and redesigns than ever before hoping to recapture lost market share.  On their website, Enigma customer Ford declares, “No One Has More Cars with 40 MPG.”  In a recent blog post, industry analyst Polk, reports that “GM is Relying on New Product Blitz to Halt Share Decline.” They say that “[t]he next 18 months are important for all OEMs, but perhaps more so for GM than for any of its rivals. From mid-2012 through mid-2014, GM will unveil the greatest array of all-new or re-designed vehicles in recent memory, if not in the company's history.”

Potential Potholes
While news about the state of the automotive industry is mostly optimistic, there are still some potential speed bumps on the road to recovery.

Continued OEM/Dealer Tension – Dealer consolidation culled the weaker dealerships from the network leaving stronger dealers less tolerant of strict OEM franchise demands. In a recent Forbes article, “Auto dealers push back on required renovations,” we see that, in particular, dealerships are resisting the edict to undergo costly facility updates citing thin margins and questionable ROI.

Dealers are also grading OEMs more harshly on their relationship skills. According to DealerNews.com’s 2012 OEM Report Card, “The marriage between franchised dealers and their vehicle manufacturers is a bit worse for wear…”.  In particular “…dealers [were] critical of advertising co-op, Service department and merchandising programs, and in some cases OEM rep support”.

OEM Concerns  – Gauging consumer preferences and expectations will continue to be a tricky endeavor. Americans are choosy when it comes to automobiles. Just as economy models are rolling off production lines, consumers are upping the ante and demanding more luxury options in those economy vehicles.

Additionally, the explosion of new models and options combined with new technological complexity of the vehicles themselves may take a toll on aftermarket parts and service profits. Producing, distributing, and maintaining updated service information and parts details will become even more exacting and challenging.

Those with nimble, updateable parts catalogs in place (such as Ford, which uses Enigma InService EPC) may fare better as car and truck redesigns continue to respond to fickle consumer preferences.

The U.S. Department of Commerce, Economics and Statistics Administration reports that “[w]hile both car and light truck sales have risen in the first quarter, car sales grew faster. In fact, sales of new cars made up 53 percent of all motor vehicle sales in the first quarter, the highest share since the third quarter of 2009. Higher gas prices have played a role here, as rising gasoline prices tend to shift sales toward more energy-efficient autos and away from light trucks.” Something that’s encouraging to auto both manufacturers and drivers alike.

If you’re an original equipment manufacturer (OEM) or a fan of the movie Forrest Gump, you may intuitively understand the connection we’re talking about. If not, you may want to read on while dreaming about the perfect combination of any two items: peanut butter and jelly, baseball and hotdogs, chicken wings and the Super Bowl, beer and… well, that last one was a trick – beer goes with everything.

The point is this. Complex equipment and aftermarket support are the perfect complement to each other – just like peas and carrots.  

Complex Equipment
First consider complex equipment – it’s pretty amazing.  It has hundreds or thousands of detailed parts that require high levels of training to maintain, repair or operate.  It performs complicated diagnostic tasks, enables production to the n^th factor, or completes tasks that sheer manpower alone cannot achieve. Complex equipment also comes with a hefty price tag and an extended product life cycle that could last years or even decades.  These are definitely not disposable or consumable types of equipment, but durable long-lasting investments that add capability and value to any business venture.  Think medical imaging machines, cars and trucks, or masonry forklifts.

The sophistication of complex equipment, however, means that support extends well beyond the initial design and manufacture of the piece of equipment. It encompasses the entire product life cycle including warranty, post warranty service, and sometimes even remanufacture or deconstruction at obsolescence.

Aftermarket Support
For these reasons, aftermarket support is like the hand in glove to complex equipment. We’re talking the serious business of parts, maintenance and service support to keep these highly valuable pieces of equipment functioning at peak performance with minimal downtime. It’s making sure the ultrasound machine detects the baby’s heart beat, the mechanic has the part and know-how to fix the transmission on your Camaro restoration, and the skid steer loader still turns on a dime while lifting a bucketful of gravel. Aftermarket support keeps life and business humming.

The Pairing and the Challenge
While complex equipment and aftermarket may exist independently, their pairing results in a delightful combination of minimal equipment downtime, higher customer satisfaction rates and exceptional brand loyalty. OEMs that understand this vital connection and actively blend efforts on new sales along with aftermarket support have the biggest potential for long-term gains.

What seems like a natural recipe for success though can be a challenge to achieve. With boatloads of advancing technology, keeping the maintenance and repair of complex equipment simple is becoming more difficult. This is especially true in scenarios like automotive manufacturing, which works with a network of dealerships for new car sales and service.  OEMs are taking on more responsibility for helping their dealers understand the new technologies by providing better parts identification, easier access to service information, and new diagnostic tools.

Recipe for Success
A great example of a successful pairing of complex equipment and aftermarket support is Ford with their Ford Parts Advantage program. Their challenge was to deliver accurate service and parts information, and simplify parts look-up for their dealers. They chose Enigma InService EPC software system to streamline the parts identification and ordering process through a user-friendly interface. The system integrated with their key business systems (EPC, SCM, DMS and PLM) so the information was as current and accurate as possible. The deep integration allowed Ford dealerships to up-sell and cross-sell more by prompting staff with related parts and recommended service activities.  

The Ford Parts Advantage was a huge achievement. They successfully combined the manufacture of their vehicles (the complex equipment) with an aftermarket support system (Ford Parts Advantage) that reached far into the extended product lifecycle making it easier for dealers to properly service and maintain the vehicles for car owners. Ultimately this gave Ford a competitive advantage by securing higher customer satisfaction and brand loyalty.

Manufacturers looking to recreate the achievement of Ford can find similar recipes for success by considering electronic parts catalogs that can help their own service staff or those of their dealers better maintain and support the equipment for the life of the equipment. After all, without the peas, would we ever eat the carrots?

Norwegian Defence, the Nordic country’s armed forces has embarked on an ambitious, all-encompassing installation of an SAP-based logistics management system. The project spans various facets of the air, land and sea operations, from the acquisition of equipment to its deployment, operation and maintenance and finally its sale/retirement. While the focus is on core functional areas, such as finance or maintenance, the documentation related to all Norwegian Defence equipment is a critical piece of the puzzle, as it is needed at all stages of the equipment lifecycle.

Sap and Enigma have been chosen to collaborate on the integration of our InService MRO with SAP software to ensure the logistics readiness for the Norwegian Armed Forces.

Enigma has had many successful InService MRO implementations in the defense sector including U.S. Department of  Defense with the U.S. Army and U.S. Navy. In the commercial aviation industry we've worked with top airlines such as Korean Air Lines, Air France Industries KLM Engineering and Maintenance, and AtiTech to name a few. But our involvement with the Norwegian Defence project poses some new and interesting angles. The technical documentation issues may be familiar, but the mission critical nature of the documents and the various user groups in the organization add a complexity layer not present in commercial airlines.  

All organizations rely on equipment uptime and availability of accurate information, all the more so when that equipment is mission critical. There are several core challenges that Norwegian Defence must tackle on the road to equipment uptime. Many of these challenges are related to documentation:

• Different processes and governing body regulations exist within the various groups, so achieving a “one-size-fits-all” solution is not easy
• Different types of technical documentation formats exist  within the armed forces, ranging in structure from PDFs to the latest S1000D XML standard, as well as various MIL-SPEC SGML/XML standards; interestingly, unstructured PDFs constitute a vast majority of the data
• While some groups really care about official S1000D documentation, others have absolutely no concern for it and would prefer to be working with PDFs that give access to the information they need in the simplest way; therefore, intelligently handling PDF content and overcoming PDF limitations has become a crucial success factor
• The management and delivery of technical documentation are sometimes perceived as one and the same thing; in fact, delivery relies on easy access to information needed to perform operational or maintenance tasks in an optimised manner, while management relies on maintaining and retrieving previous versions of the documentation. Just having access to the managed information is not enough, particularly for the maintenance community
• Almost every process in maintenance is related to a technical document: maintenance manuals, parts catalogs, job cards, engineering orders, to name but a few. While important job information (such as when the job will be done, where it will be done, what skill is required for it etc.) can come from the SAP MRO System, one cannot perform maintenance without good and ready access to the documentation

Aside to these challenges relating to documentation, there are “generic” challenges that come with a project as complex as this. The sheer scale of the project has mandated continuous changes to scope as well as the timeline. SAP project methodology is being deployed across all solution providers, even if SAP is not the underlying architecture or methodology for that provider. This makes for continuous (and sometimes arduous) adaptations to well established processes.

Perhaps most importantly, communication is key in such a project. The nature of the business is that not all team members are available all of the time, and some are assigned to other projects. Continuity in design processes and customer requirements becomes difficult, so establishing clear and open lines of communication and periodical reviews is crucial in ensuring everyone is on the same page. Having previously worked with defense organizations, and our experience and long-standing partnership with SAP uniquely positions Enigma as the ideal provider for this complex logistics challenge. 

When it really gets going, I believe this project is going to be one of our most interesting and challenging ones to date. Bring it on!

Can OEMs can find a way to improve customer satisfaction and brand loyalty through “Right to Repair?

Recently we posted a blog article about the passage of a new law in Massachusetts called “Right to Repair” that promises to improve choice and reduce costs when people get their cars serviced. On several occasions Enigma has written about what we perceive to be the false claims behind Right to Repair (RTR) however, now that RTR has become law it is time to focus on how manufacturers (OEMs) should respond to this new reality. As unpleasant as RTR may seem to OEMs, this law gives them an incredible opportunity to improve customer satisfaction and brand loyalty.

While dealership groups have been vocally opposed to the passage of RTR, the OEMs have kept their concerns more muted. There are two reasons for the OEM’s caution: 1) OEMs would be hard pressed to publicly oppose a bill that promotes consumer rights without alienating their customers; 2) given the potential for bad publicity, OEMs must focus on protecting their own spare part sales rather than protecting the dealer’s service revenue. (OEMs don’t get paid for dealer service, only for parts.) Dealers, on the other hand, raised concerns about independent repair facilities’ (IRF) ability to ensure quality and safety of repairs. The reality is, OEM and dealer concerns that RTR will add cost, complexity and uncertainty to an already fragmented automotive service and support environment have yet to be proven.

Moving forward OEM’s have two primary concerns:  1) protecting their service parts business, including the intellectual property associated with parts, diagnostic tools and service procedures; 2) finding ways to increase revenue and profits for vehicles and service parts. Curiously, these are the same concerns OEMs had before RTR legislation was approved. Both of these challenges become more manageable if OEMs can find a way to improve customer satisfaction and brand loyalty.

Improving customer satisfaction and brand loyalty were the key points of a recent Right to Repair blog post by Enigma and now an IRF is making the same claim for OEMs that cooperate with IRFs (not just dealers). The challenges IRFs face from overly protective OEMs was highlighted in this Accurate Automotive blog post but more importantly was the observation that OEMs like Toyota have significantly improved customer satisfaction and brand loyalty by making it easy for IRFs to get the information needed to fix Toyota’s cars. Accurate Automotive claims that whenever customers feel they can get reasonable service performed quickly, accurately and inexpensively they are happier about their vehicle choice, which benefits the OEM.

Carlisle & Company is seeing something similar and has highlighted the customer satisfaction problem in a recent blog post that offered a first-hand description of a recent dealer service experience, comparing it to an episode of the TV show “Seinfeld.”  (I’ll let you read it for yourselves but it’s a fascinating, first-hand account of a service visit gone wrong.) Carlisle however didn’t stop with a complaint; They took action and recently announced the creation of a dealer forum – a website called MyGuy. It’s Carlisle’s attempt to help dealers learn how to improve customer satisfaction while still staying profitable. In fact, the web site promises “if [dealers] employ consistent ‘MyGuy’ practices, you can achieve significantly higher levels of service retention, customer service satisfaction, and vehicle sales retention [brand loyalty].”

Ideas like MyGuy are a great way to help OEMs and dealers figure out how to profit in the RTR world. But OEMs have an opportunity of their own to improve how dealers and IRFs service their vehicles. By rolling out a comprehensive electronic parts catalog (EPC) that combines parts and service information, diagnostics and service bulletins OEMs can revolutionize how their cars are serviced (by dealers and IRFs) and score major customer satisfaction points and lock-in brand loyalty. Products like Enigma’s InService EPC have helped companies like Ford ensure that repair decisions are always based on accurate parts and service information. Offering an OEM-branded EPC to IRFs (delivering it beyond the dealer) provides an incredible opportunity to improve customer satisfaction and brand loyalty that is both fast and easy. And an EPC may help OEMs comply with the Right to Repair law at the same time.